One of Russia’s leading internet services operators is seeing continuing success from selling digital content to users, after finding many of its advertisers are moving from web to TV.
Mail.ru Group made more than half of its money this fall (54 percent) from user payments (up from 49 percent a year ago), it reported in Q3 earnings.
Those sales are coming from virtual gifts in Mail.ru’s Odnoklassniki social network, its own My World social service, the love.mail.ru dating site, from social games Mail.ru syndicates to third parties and from freemium massively-multiplayer online games (MMOs) like Warface and recently-launched Dragon’s Nest.
Asked by analysts whether he would now start to wring more money from each user, COO Verdi Israelian told analysts the priority is first to get people to pay at all: “When you have enough people paying consistently, then you can start growing ARPU – at this stage, that’s not the focus just yet. Pay penetration is to grow significantly more.”
Operators that publish content for free tend to fund themselves with advertising. Mail.ru’s growing strength in user payments gives it shelter, should Russia’s advertising market slow down.
Mail.ru Group display ad sales have grown just seven percent over the last year. The company blamed two things – a deliberate reduction in inventory on its own Odnoklassniki social network, and competition from TV.
“(Advertisers’) budgets have been reallocated to TV because the prices have gotten much much cheaper in TV,” CEO Dmitry Grishin told analysts.
Mail.ru paid MMO game revenue boomed by 72 percent while non-game paid content revenue grew 31 percent. Contextual ad revenue grew 48 percent, with the company admitting it lags rivals in the space.
Grishin said Mail.ru will focus on shooting games but is considering adding card and sport games in future, explaining that not many of these are available in Russia.